New Tīwai Point deal could reinforce coal use for electricity

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Tīwai Point Aluminium Smelter.
Photo: RNZ / Nate McKinnon

The new 20-year supply contract for the Tīwai Point Aluminium Smelter could reinforce coal use in the country’s electricity supply, Greenpeace says.

The future of the plant had been hanging in the balance as its power supply contract was due to expire this year.

But a long-term fixed-price power contract, agreed between Meridian Energy and the Southland plant’s private operator, will keep the smelter operational until at least 2044.

Greenpeace Aotearoa director Russel Norman said the plant owner, Rio Tinto, received a “sweetheart deal” for the smelter, which uses about 13 percent of the country’s electricity.

“The electricity companies love having Rio Tinto on the grid because it increases demand, and that means we have to fire up the coal units and that means every generator in the country gets paid a much higher rate by having Rio Tinto in the demand.”

He said modelling revealed the closure of the Tīwai Point smelter could have led to lower electricity prices and a greater use of renewable energy.

Norman said an agreement for the smelter to cut its power use at times of peak demand was a positive step.

“[It] does add quite a bit to the ability to use renewable energy within the system [but] the other side of course is that it means… regular consumers are going to continue subsidising the smelter because of the sweetheart deal the smelter gets from the New Zealand system.”

But the head of South Port in Bluff, Nigel Gear, said there was widespread relief the smelter would continue to operate for another 20 years.

South Port had always been positive there was a good case for the smelter to continue operating at Tīwai Point, he said.

“Tīwai represents a third of our cargo base, it’s just over a million tonnes of cargo a year, and it would be representative of about 20 percent of our profitability.”

Gear said the plant’s closure would have meant the loss of nearly 1000 jobs in the community, with a massive flow-on effect.